The collapse of the latest in a string of failed redevelopment plans for London's Battersea Power Station could delay the creation of an estimated 25,000 jobs against a worsening British economic backdrop.
Lloyds Banking Group and Ireland's National Asset Management Agency are seeking to have the site's owner, a vehicle controlled by AIM-listed Real Estate Opportunities, placed into administration after it was unable to meet repayments on 325 million pounds of debt against the famous London landmark.
Battersea's imposing four white chimneys have been a feature of London's skyline for almost 80 years, but plans to redevelop the site have repeatedly run aground since power production there ceased nearly three decades ago.
A court hearing has been set for December 12 and should the site be placed in administration then, plans for the 5.5 billion pounds project will likely stall and -- in a worse case scenario -- it will remain mothballed for up to three years.
REO has been in detailed talks about the first phase for a year, one source close to the project told Reuters on condition of anonymity. A new developer would invariably have their own plans and all of that hard work could go out the window and delay the redevelopment, the source said.
Two other sources familiar with the matter said state-run Lloyds and NAMA did not have a formal list of potential buyers, but were keen to find one with sufficient equity and experience in managing large redevelopment projects to take on the debt and financial commitment.
The latest twist in the Battersea redevelopment saga came a day after UK Chancellor George Osborne backed plans for an extension of the Northern Line tube route to the area costing about 750-950 million pounds, a key element for the scheme's viability and one a developer would have to part-fund.
The 10.1 million square-feet project would create 15,000 jobs, REO had previously said. Osborne said the subway plans would help create about 25,000 new jobs in the wider area.
Just two days ago George Osborne and (London Mayor) Boris Johnson promised Londoners two new tube stations in South London, London mayoral candidate Ken Livingstone told Reuters.
Today it is clear that promise has been broken after the Battersea Power Station developers were forced to call in the administrators putting plans for new stations in jeopardy.
A spokesman for Johnson said the wider area had a bright future thanks to an overall 179 hectares of redevelopment that included the power station.
Despite having a majority stake in Lloyds, the government said it would not influence the bank's role in the Battersea Power Station process with a view to securing jobs against a backdrop of slowing economic growth, a spokesman for Prime Minister David Cameron told Reuters.
The banks operate at arm's length from the government and we don't get involved in their commercial decisions, he said.
Lloyds and NAMA want to sell the debt as soon as possible and use the existing planning consent for a mixed-use scheme of housing, offices and shops to lure to potential buyers, the two other sources said.
These sources also said the sale was effectively conditional on a buyer wanting to use the existing consent, rather than slowing the site's redevelopment further with variations to the planning consent.
Another source, a planning expert, said minor alterations to the existing consent could take at least a year to work through, while material changes could take three-plus years before redevelopment work started.
A plan by Chelsea Football Club owner Roman Abramovich to move the club to the power station site faced such an obstacle as the fresh proposals would take years to approve, the planning source told Reuters.
Property developers British Land, Capital & Counties and Development Securities have been linked to the scheme, as well as sovereign wealth funds and Malaysian property company SP Setia.
A recent offer by Setia was rejected by the lenders because there were too many strings attached, the second source said.
North American developers had also shown interest in the site given its proximity to the planned new U.S. embassy, a project local politicians hope will help kick-start the regeneration of the Nine Elms and Vauxhall areas of London.
The lenders waived a debt maturity deadline at end-August relating to the 325 million pounds REO borrowed to pay for the Grade II listed site near the top of the market in 2006 in the hope a new equity partner would materialise for the stalled project.
It is understood that Lloyds does not expect to make a loss on the loan sale, having already made provisions against it.
All four of the power station's chimneys need to be knocked down and rebuilt, Richard Barrett, one of the co-founders of Treasury Holdings, which has a majority stake in Real Estate Opportunities, told Reuters in October.
(Reporting by Tom Bill, Additional reporting by Tim Castle; Editing by Andrew Macdonald and Chris Wickham)